Changchuan Technology released its 2023 annual report and 2024 quarterly report. Revenue and profit for the full year of 2023 were under pressure, and the 24Q1 growth inflection point was clearly evident. Looking ahead to 2024, with the marginal recovery of downstream prosperity, the company's digital SoC testing machines will continue to expand, and new products such as storage testers, three-temperature sorters, and probe stations will open up market space. Combined with cost reduction and efficiency on the cost side, the company's revenue and profit are expected to improve significantly year-on-year, maintaining an “increase in weight” investment rating.
The company's revenue and profit for the full year of 2023 were under year-on-year pressure, increasing investment in R&D. The company achieved revenue of 1,775 billion yuan for the full year of 2023, which was mainly due to a decline in the prosperity of the sealing and testing industry and a slowdown in demand from some customers. The company's main product testing machine revenue was 676 million yuan, -39.4% year on year, and sorter revenue was 820 million yuan, -34.7% year on year; gross profit margin was 57%, -0.3 pct year on year; net profit was 45 million yuan, -90.2% year on year; after deducting non-net profit loss of 77 million yuan, a year-on-year decline of 4.7 million yuan. The company's non-recurrent revenue mainly came from government subsidies 40 million yuan, profit and loss of 83 million yuan from changes in fair value arising from the acquisition of Changyi Technology (Malaysia EXIS), etc. The company's profit was clearly under year-on-year pressure. The main reason was the year-on-year decline in revenue and increased investment in R&D. In 2023, the company spent 715 million yuan on R&D, and the R&D cost ratio was 40%, +15 pcts year on year.
24Q1 revenue grew at a high year-on-year rate, and profits drastically turned losses into profits. The 24Q1 company achieved revenue of 550 million yuan, +74.8% YoY/-1.2%; gross profit margin of 54.6%, -1.4pcts/month-on-month -1.2pcts; net profit to mother was about 4.1 million yuan, up 61 million yuan; and deducted non-net profit of about 1.6 million yuan, an increase of about 68 million yuan. The company's revenue grew rapidly year on year, and the cost side was clearly controlled. The 24Q1 R&D investment was 180 million yuan, a slight increase over the previous year, but the R&D expenses rate was 32%, down 20 pcts year on year, and the sales and management expenses ratio decreased by 7 and 5 pcts year on year, respectively.
Looking ahead to 2024, the company's revenue is expected to increase significantly year over year, and performance is expected to improve significantly year over year. Looking ahead to 2024, the company's revenue is expected to grow at a high year-on-year rate as the operating rate of the backstage sealing and testing industry gradually recovers and customer demand increases. According to the 2024 equity incentive assessment target, based on 2023 revenue, the 2024/2025/2026/2027/2028 revenue growth rate was not less than 50%/80%/110%/140%/170%, respectively, and the corresponding revenue was not less than 26.6/32/37.2/42.6/48 billion yuan respectively; as the scale effect of the company became apparent, and after developing new products in the early stages, the company will also continue to control fees, and the performance is also expected to usher in a profit inflection point.
Digital SoC testing machines continue to expand, and new products such as storage testers, three-temperature sorters, and probe stations further open up room for growth. 1) Testing machine: The company's digital SoC testing machine D9000, etc. are being rapidly deployed, and downstream customers are continuing to expand; the company's new storage tester products are expected to be released in the future, further opening up the growth ceiling; 2) Sorters: the industry boom cycle is gradually bottoming out, and translational three-temperature sorters are gradually being launched to meet testing requirements such as automotive-grade ICs; 3) Probe stations: The company's products support almost all 8/12 inch CP testing requirements, and are now gradually being launched.
Investment advice. The company's revenue and profit in 2023 are under year-on-year pressure, and 24Q1 has seen a clear inflection point in growth.
Considering that the prosperity of the downstream sealing and testing industry is expected to improve marginally in 2024, the company's digital testing machines continue to expand and customers continue to expand, new products such as storage testers, three-temperature sorters, and probe stations are expected to gradually be launched, and the company's revenue is expected to grow at a high year-on-year rate; combined with the company's cost reduction and efficiency on the cost side, the company's profit margin is also expected to reach an inflection point. We expect the company's revenue for 2024/2025/2026 to be 30.8/36.7/4.27 billion yuan, and the estimated net profit to mother is 4.6/6.2/770 million yuan, corresponding PE is 38.3/28.3/23.0 times. Maintain an “overweight” investment rating.
Risk warning: Downstream fab production expansion falls short of expectations, increased costs during the period, new product development falls short of expectations, and the risk of increased competition in the industry.